DreamWorks Animation Partners with China on Movie Venture

China’s strict limits on foreign films has frustrated Hollywood for years – the studios are dying to break into the fast-growing media market.

Today DreamWorks Animationunveiled a partnershipto do just that, with the “if you can’t beat ‘em, join ‘em” strategy. It’s partnering with China’s leading media companies: China Media Capital, Shanghai Media Group and Shanghai Alliance Investment to launch a new company called “Oriental DreamWorks.”

The joint venture will develop and produce Chinese animated and live action content—a shift for DreamWorks Animation, which here in the US focuses entirely on animation. The content will focus on the Chinese market, but will also distribute to other countries. And it’s not just movies and TV, the companies say they will pursue “business opportunities in the areas of live entertainment, theme parks, mobile, online, interactive games and consumer products.”

The goal is to create the definitive Chinese-language family-oriented media company. Its diverse array of potential businesses make it sound an awful lot like Disney is the main competition. This announcement comes after DreamWorks Animation’s ‘Kung Fu Panda 2’ broke records last year as the highest grossing animated film in China of all time, grossing about $100 million.

The new company plans to open a studio in Shanghai, and will be 55 percent owned by the Chinese companies and 45 percent owned by DWA. The initial capitalization of the company—cash and intellectual property – are valued at $330 million.

DreamWorks Animation’s growth has been limited by the fact that the company only releases a handful of movies a year. This news answers the question often asked around Hollywood: “What’s next for Jeffrey Katzenberg”? The stock is up 17 percent year to date, but it’s still off over 30 percent over the past twelve months. We’ll see if revenue from this venture can smooth out the studio’s often volatile quarter-to-quarter numbers, and reassure investors about growth.